Fed increases interest rates by 25 basis points

 

Stocks tumbled on Wednesday as the Federal Reserve continued hiking rates, while at the same time acknowledging turmoil in the banking sector could slow the already fragile economy. Regional bank shares led the slide.

On the bullish side, the latest Fed projections called for just one more hike this year. But, Chair Jerome Powell said in a news conference that the inflation fight is far from over.

And an unexpected surge in inflation in Britain has complicated a move on interest rates. Consumer prices there rose 10.4 percent in February compared with a year earlier, accelerating after months of slowing down. That may undermine expectations that the Bank of England was close to halting rate increases as part of its inflation-fighting efforts; the central bank will announce its next policy decision tomorrow.

Overnight The Dow Jones Industrial Average traded 530 points lower, or 1.6 per cent. The S&P 500 fell 1.7 per cent, while the Nasdaq Composite declined 1.60 per cent.

The Fed's rate hike comes amid uncertainty over the health of the global banking sector. Earlier this month, Silicon Valley and Signature Bank collapsed, while UBS acquired rival Credit Suisse — a move forced by Swiss regulators to shore up the country's banking industry.

Meanwhile, Fed Chairman Jerome Powell noted that bank deposit flows had stabilised over the last week after the central bank and regulators moved to backstop depositors.

US home prices fell for the first time in over a decade. With deflation finally coming for the housing market: For the first time in 131 months, the median price of a home in the US fell on an annual basis.

Google has launched its new AI tool – called Bard – Google sees it as complimentary to its search business—not a replacement. As the dominant leader in search, Google must be careful with how it deploys AI: It can’t cannibalise its search business model, but it also can’t allow the competition to disrupt search, either.

In commodity news, Albemarle Corporation announced a new $1.3B U.S. lithium mega-flex processing facility in South Carolina. The plant expects an annual production of approximately 50,000 metric tons of battery-grade lithium hydroxide from multiple sources, with the potential to expand up to 100,000 metric tons. Construction is expected to begin late in 2024.

Argentina's mining exports reached record levels in 2022, largely driven by a 234 per cent increase in lithium exports driven by growing demand for electric vehicles; the government expects further revenue growth from two new lithium projects and two major expansions set to launch this year.

Overall, all S&P 500 sectors closed lower overnight. Real Estate and Financials were the worst performers, whilst Technology was the leader.

Futures

The SPI futures are pointing to a 0.7 per cent fall.

Currency

One Australian dollar at 7:20 AM is buying 66.83 US cents..

Commodities

Iron ore futures are pointing to a 0.2 per cent gain.

Gold gained 1.87 per cent. Silver jumped 2.90 per cent. Copper rose 1.08 per cent and oil added 0.5 per cent.

Figures around the globe

Across the Atlantic, European markets closed higher. London’s FTSE gained 0.4 per cent, Frankfurt added 0.1 per cent while Paris closed 0.3 per cent higher.

In Asian markets, Tokyo’s Nikkei gained 1.9 per cent, Hong Kong’s Hang Seng added 1.7 per cent while China’s Shanghai Composite closed 0.3 per cent higher.

Yesterday, the Australian sharemarket closed 0.9 per cent higher at 7016.

Ex-dividends

Bisalloy Steel (ASX:BIS) is paying 4 cents fully franked
Cash Converters (ASX:CCV) is paying 1 cents fully franked
CI Resources (ASX:CII) is paying 2.5 cents fully franked
IPD Group (ASX:IPG) is paying 4.6 cents fully franked
Peet (ASX:PPC) is paying 3.5 cents fully franked

Dividends payable

Australian Finance Group (ASX:AFG)
Bega Cheese (ASX:BGA)
Deterra Royalties (ASX:DRR)
EVT (ASX:EVT)
GR Engineering Services (ASX:GNG)
Helloworld Travel (ASX:HLO)
HT&E (ASX:HT1)
Ingenia Communities Group (ASX:INA)
Insurance Australia Group (ASX:IAG)
Kip McGrath Education Centres (ASX:KME)
Meridian Energy (ASX:MEZ)
oOh media (ASX:OML)
Smartgroup Corporation (ASX:SIQ)
Summerset Group Holdings (ASX:SNZ)
TerraCom (ASX:TER)
The Lottery Corp (ASX:TLC)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap. Disclaimer

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